The biggest fear in stock market investing is hitting the limit-down—especially when a stock is locked at the limit-down price. Once that happens, many people start to panic: they want to sell but can’t sell. In fact, selling when the limit-down is locked is both a technical issue and a psychological issue. Today, let’s talk about these most extreme phenomena in the stock market.

Let’s start with the basics first. Limit-up and limit-down occur when the stock price reaches that day’s maximum or minimum fluctuation limit. Taking Taiwan’s stock market as an example: the daily limit on stock price movements is 10% of the previous day’s closing price. Anything beyond that gets locked. For example, if TSMC closed at 600 NT dollars yesterday, then today its highest price can only rise to 660 NT dollars, and its lowest price can only fall to 540 NT dollars. Once the price touches this limit, it’s as if the stock price is frozen—the price chart turns into a straight line. On the trading board, limit-up is marked with a red background, and limit-down is marked with a green background, so you can tell at a glance.

Many people think that once a stock hits the limit-up or limit-down, it can’t be traded anymore. That’s not true. Even if a stock is at the limit-up, you can still place buy orders or sell orders—the difference is just in how difficult it is to get filled. When the stock is at the limit-up, there are far more people trying to buy, so your buy order may need to wait in line, while sell orders are usually filled almost instantly. At the limit-down, it’s the opposite: buy orders get filled immediately, but sell orders have to queue.

As for how to sell when the stock is locked at the limit-down—this is the biggest headache for investors. Once a stock hits the limit-down, the probability that it continues to fall over the next several trading days is usually very high. If you wait until it truly hits the limit-down to sell, you often end up “selling lower and lower.” The smartest approach is to take action during the pre-market call auction: the earlier you place orders, the better, because the trading rules are “price priority, time priority.” The earlier you get in the queue, the higher your chance of execution. Many people see that they didn’t get the sell filled and rush to cancel and re-enter their order—only to realize, too late, that this can push their order to the very end of the queue, making it even harder to get filled. After placing an order, it’s best to keep it as-is and avoid frequent adjustments.

If you truly get locked inside the limit-down, there are two timing points you should watch. First, pay attention to the order size of the “buy 1” at the limit-down price. If a large number of buy orders suddenly appears, it may mean the main force is stepping in and taking over. In that case, you might consider selling along with them—but act fast. Second, in the last 10 to 15 minutes before the close, many limit-down stocks will show a brief release of liquidity. Some capital moves in to pick up bargains—this can also be the last good opportunity to sell that day.

The causes of a limit-down are usually a few common categories. A negative news shock is the most direct example—such as a disastrous earnings report, a decline in gross margin, company mishandling, or an overall downturn in the entire industry. Panic in the market can also trigger a wave of limit-downs. For instance, during the 2020 COVID-19 outbreak, a bunch of stocks just went straight into limit-down. Another common reason is large investors dumping shares—pumping the price first and then distributing their holdings, which easily traps retail investors. Margin calls are even worse. For example, during the 2021 shipping stock crash, once the price fell, margin call triggers would immediately cause sell pressure to surge; retail investors wanted to run but often didn’t have time. Technical breakdowns can also lead to stop-loss selling—when key supports like the monthly and quarterly moving averages are broken, and you see danger signals such as breakout volume spikes and long black candlesticks, that’s a warning sign.

By contrast, the U.S. stock market has no limit-up or limit-down restrictions. They use a circuit breaker mechanism—an automatic trading halt. When the S&P 500 index drops by more than 7% or 13%, the market pauses for 15 minutes; if it falls to 20%, trading is stopped outright. Individual stocks also have circuit breakers: if a stock’s price moves up or down by more than 5% within a short period, trading is temporarily suspended.

When you encounter a limit-up or limit-down, the most important thing is to make rational judgments. The mistake that beginners are most likely to make is blindly chasing rallies or selling in panic. When you see a limit-up, don’t rush in—first find out whether there are truly strong positive catalysts behind it. When you see a limit-down, don’t panic. If the company itself has no real problems and it’s only being dragged down by market sentiment, it may very well rebound later. Holding it or opening a small position is often the best strategy in such situations.

Another operating approach is to trade related stocks. When one stock hits the limit-up due to good news, you can consider buying closely related upstream or downstream companies or similar stocks. For example, when TSMC hits the limit-up, other semiconductor stocks typically move as well. Some Taiwanese stocks are also listed in the U.S., and you can place orders through cross-brokerage or overseas brokers, which makes execution relatively more convenient.

In summary, the key to selling when locked at the limit-down is to plan ahead and respond quickly. Once you notice that a stock may hit the limit-down, you should place a sell order during the pre-market call auction as soon as possible. Don’t wait until it’s truly locked and then regret it—by then, getting out will be difficult.